Garbage In, Great Stuff Out

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Want to ensure that people in your company make bad decisions? Deliver “the right information to the right people at the right time.” Certainly this phrase has seductive appeal. It seems so sensible that it’s constantly bandied about (“You know what we’re really about? Our company delivers the right information to the right…”) without any real thought as to what it actually implies. But the fact is, the notion masks a deep misunderstanding about how people make decisions—and about how leaders lead.

The slogan goes down so easily because it addresses genuine fears. Although we’ve seen an unprecedented increase in the quantity of information available, the quality of our understanding hasn’t improved much, if at all. Indeed, the increase in information has only made the haystack larger, while the needle hasn’t grown a millimeter. So, it’s understandable why people feel that (to employ another increasingly hackneyed phrase) “we need to cut through the noise and find the signal.” Only then can we make good decisions. Or so the myth goes.

Even though the fear is well founded and the problem is real, the model of decision making implicit in this way of thinking is ﬂawed. It says that good decisions come from good input. “Garbage in, garbage out,” we unquestioningly believe. That is true about computers. But things are a bit more complicated in human affairs.

Imagine that you’re trying to decide whether to open a Hong Kong office. One consulting firm says that the Southeast Asian market for your goods will swell 35% in the next two years; another says it will grow 15% at best. A local building consultant says that total construction costs will be substantial but not outrageous; a naysayer in your office warns that the local consultants always lowball costs, and you should add 75% to any estimate you receive from them.

Meanwhile, the lawyers are in total disarray. You’ve got one firm telling you that you probably won’t be allowed to introduce your new product until 18 months after your office opens. But you’ve got another firm, used by your local representatives, arguing that if you manufacture 50% of the constituent elements in China, the regulatory hurdle gets much lower. Your accounting firm thinks it will take five years for you to hit profitability, but your regional operating officer thinks he can do it in three.

What’s more, you’re the target of a not-very-subtle campaign by your Australian office to keep the Hong Kong sales effort headquartered in Sydney; they’re faxing you charts showing how much cheaper it would be to expand there than to set up shop in Hong Kong. You’ve also been receiving e-mails pointing you to Web sites that highlight the risks involved in investing in Hong Kong given the political situation.

Granting that you’re the right person and this is the right time, which of the above is the right information for making your decision about the Hong Kong office? Which are the inputs that will keep you from putting garbage out? More to the point, do you want someone else deciding this for you? The fact is that making an informed decision means not just saying yea or nay but evaluating your sources and deciding which to trust. Cause and effect for computers—“good inputs determine good decisions”—are reversed when it comes to humans. Often, only a good decision can determine what was good input.

Often, only a good decision will determine what was good input.

And it’s not just the quality of the individual bits of information that is relevant but how that information ultimately will be combined. That’s because a decision isn’t simply a node at one fork in a decision tree; it isn’t the conclusive result of a mathematical formula. It’s the denouement of a story—one that makes sense of the data and, not incidentally, one the manager will use to gain support for the decision.

In deciding to open the office, you’re spinning a tale—for colleagues, subordinates, shareholders, even competitors—about that part of your business and that part of the world. This story goes beyond a description of the issues or a justification for the decision. It is an implicit narrative, complete with a story arc and mood-setting characterizations. It’s the story that sold you, and which strands of information you choose to weave together, and in what fashion, will affect the success of the narrative tapestry.

In the case of the Hong Kong office, you must be ready to explain that the consultants who think your products won’t do very well are taking the short-term view. Another firm, which has a broader view and has been right before, says that the market will be ripe for what you have. Competitors have failed to make inroads in Hong Kong (you explain) because they can’t get past the regulatory barriers. But your company has these great local guys who’ve told you that if you build the product mainly out of Chinese parts (and here’s why that’s feasible), it’ll cut 18 to 24 months out of the usual governmental runaround. That will let you hit the ground running by 2004, at which point demand will be picking up because of particular market trends. Now (and here’s where the narrative drama builds), if you move fast, you can get a preliminary space built in time to capitalize on the emerging market. That would allow you to become profitable as early as 2007, which would not only be a coup but also allow the funding of…well, you get the idea.

In constructing this argument, you’re deciding which information to trust, based on deeply personal knowledge and experience. And you’re drawing on lots of information, good and bad, to create a nuanced narrative, the tale of a quest, complete with obstacles and heroes (your employees) who will strive to overcome them. Leaders are the ones who are best able to craft these stories—and that’s why leaders are uniquely qualified to make decisions.

If managers forget that, unlike computers, our decisions aren’t solely determined by the quality of inputs, if they try to manage the information tsunami by restricting the information that reaches the ultimate decision makers, they are making—or at least unduly inﬂuencing—the decision. They are confusing people with machines and decisions with calculations. In attempting to make a more efficient and rational organization, they will instead make one that is blinder and stupider.

A version of this article appeared in the September 2001 issue of Harvard Business Review.

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